Magnum Hunter Seeks Chapter 11 Bankruptcy Protection

by San Antonio Attorney

In order to carry out a debt-slashing strategy, oil and gas producer Magnum Hunter Resources filed for Chapter 11 bankruptcy protection last on Dec. 15.

The company ranked as one of the biggest energy producers filing for bankruptcy this 2015.  Other energy companies who recently filed are Samson Resources, Energy & Exploration Partners, Quicksilver Resources, and Sabine Oil & Gas.

The debt-cutting plan was due to prolonged slump in oil prices that depleted the company’s financial resources.

The company underwent a “restructuring agreement” that converted the funded debt into equity.  In return, this will reduce more than $1 billion worth in debt, according to the company’s official statement.

The funds for the operations in post-bankruptcy filing will be derived from the company’s lenders, who agreed to provide up to $200 million in financing.  This will also convert into equity when the company emerges from bankruptcy.

The company primarily operates in the Appalachian Basin in West Virginia and Ohio.  Magnum Hunter projected that they will emerge from bankruptcy this coming April.

Oil prices have dropped to less than $40 per barrel compared to the prices 18 months ago, which was more than $100 a barrel.

Most energy companies use high-yield debt to grow in the past years.  However, the investors are more concerned that the debt may not be repaid and this sparked a move for a sell-off in junk bonds.

Magnum Hunter’s assets amount to $1.1 billion and $1.5 billion in debts.

Magnum Hunter was one of the first energy companies to stop frocking in order to save cash.  The company joined a group of shale oil companies known as “zombies.”  This was called as such due to insufficient cash to run drilling operations in order to find new sources of oil.

Magnum Hunter’s shares lost 40 percent of trading value, reduced to a price of 2.5 cents each.

 

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